Correlation Between Sichuan Fulin and Kidswant Children

Can any of the company-specific risk be diversified away by investing in both Sichuan Fulin and Kidswant Children at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sichuan Fulin and Kidswant Children into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sichuan Fulin Transportation and Kidswant Children Products, you can compare the effects of market volatilities on Sichuan Fulin and Kidswant Children and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sichuan Fulin with a short position of Kidswant Children. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Fulin and Kidswant Children.

Diversification Opportunities for Sichuan Fulin and Kidswant Children

0.44

Correlation Coefficient

Sichuan Fulin  Kidswant Children

Very weak diversification

The 3 months correlation between Sichuan and Kidswant is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Fulin Transportation and Kidswant Children Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kidswant Children and Sichuan Fulin is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sichuan Fulin Transportation are associated (or correlated) with Kidswant Children. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kidswant Children has no effect on the direction of Sichuan Fulin i.e., Sichuan Fulin and Kidswant Children go up and down completely randomly.

Pair Corralation between Sichuan Fulin and Kidswant Children

Assuming the 90 days trading horizon Sichuan Fulin is expected to generate 1.16 times less return on investment than Kidswant Children. But when comparing it to its historical volatility, Sichuan Fulin Transportation is 1.32 times less risky than Kidswant Children. It trades about 0.02 of its potential returns per unit of risk. Kidswant Children Products is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,294  in Kidswant Children Products on October 24, 2024 and sell it today you would earn a total of  24.00  from holding Kidswant Children Products or generate 1.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sichuan Fulin Transportation  vs.  Kidswant Children Products

Sichuan Fulin Transp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sichuan Fulin Transportation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sichuan Fulin sustained solid returns over the last few months and may actually be approaching a breakup point.

Kidswant Children

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kidswant Children Products are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kidswant Children sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sichuan Fulin and Kidswant Children

The main advantage of trading using opposite Sichuan Fulin and Kidswant Children positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Fulin position performs unexpectedly, Kidswant Children can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kidswant Children will offset losses from the drop in Kidswant Children's long position.

The idea behind Sichuan Fulin Transportation and Kidswant Children Products pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.